Employee Referral Scheme

October 2015

Employee Referral Schemes are increasingly popular in the UK; according to the Chartered Institute of Personnel and Development, 47% of companies in the UK run employee referral schemes.

Essentially, Employee Referral Schemes encourage employees to refer potential candidates for vacancies with their employers in exchange for a financial reward in the form of an introductory bonus. Sometimes, other non-cash benefits such as extra holiday, or even cars, may be offered by employers.

Benefits

• They are cheap to run and compare very favourably with the cost of using a recruitment consultancy (which typically charge fees of 20-25% of the first year’s salary);

• New recruits joining a Company following an employee referral are likely to settle in more quickly and stay for longer because they already have a circle of acquaintances within the Company through the employee who referred them;

• Employees who have been recruited through an employee referral scheme are motivated to put in as good a performance as possible that will reflect well on his or her friend.

Disadvantages

• They can limit the influx of new blood to a business because current employees tend to refer other candidates like themselves;

• If the employee referral does not work out and the referred candidate is not confirmed in post at the end of the probationary period, this can cause more upset and disruption in the workplace than if the recruitment of an external candidate is unsuccessful;

• From an equal opportunities point of view, over-reliance on this method of recruitment is likely to perpetuate existing imbalances in the composition of the workforce.

General contribution of Employee Referral Schemes

In general terms, then, Employee Referral Schemes have an important contribution to make to an employer’s candidates attraction strategy, which should also include:

• On-line job boards;

• Social media and business networking channels, like LinkedIn;

• The employer’s own corporate or corporate careers website;

• Professional recruiters i.e. recruitment consultancies.

The Simply-Docs Employee Referral Scheme Policy sets down the rules which apply to an effective staff introduction scheme and includes various optional clauses which enable the employer to adapt the policy to the Company’s own requirements.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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